Vedanta Aluminium Metal: 21% Upside Call, FY28 EBITDA in Focus

Coverage starts on the newly demerged aluminium business

Vedanta Aluminium Metal Ltd (VAML), the aluminium business demerged from Vedanta, is drawing fresh brokerage attention soon after listing. Nuvama Institutional Equities initiated coverage with a Buy rating and a target price of Rs 540, pointing to a combination of higher volumes, structural cost reductions, and expectations of firm aluminium prices through FY28. Motilal Oswal Financial Services also initiated coverage with a Buy rating and a target price of Rs 540.

The cluster of initiations matters because the stock has seen sharp moves since listing, while analysts are trying to anchor valuation around FY28 earnings and leverage metrics. Several research notes also frame the stock as a key part of Vedanta’s broader demerger story.

Nuvama’s call: target price Rs 540 and EBITDA growth thesis

Nuvama’s target price of Rs 540 implies 21% upside from the previous close of Rs 444.45, as cited in the note. The brokerage expects EBITDA CAGR of 29% between FY26 and FY28, driven by higher production volumes, improving operating efficiencies, and a sharp decline in production costs.

Nuvama estimates that the combination of lower costs, higher production, and firm aluminium prices could lift EBITDA to around Rs 419 billion by FY28. It also cited EBITDA per tonne of USD 1,560 in FY28 as part of its FY28 outlook.

A key part of the Nuvama thesis is balance sheet improvement. Net debt is projected to decline from Rs 375 billion in FY26 to about Rs 34 billion by FY28, translating into an estimated net debt-to-EBITDA ratio of 0.1x.

Aluminium price outlook in the notes: firm till FY28

Nuvama expects aluminium prices to remain firm until FY28, with supply tightness likely to loosen only in the second half of that year. This macro assumption supports the brokerage’s view that earnings upgrades can come not only from internal cost work but also from a supportive price environment.

The research framing is straightforward: if aluminium prices stay firm while VAML’s costs fall, profitability can exceed historical averages. The reports presented this as an interaction of volumes, pricing, and costs, rather than a single-variable story.

Other brokerages: targets from Rs 550 to Rs 600

Emkay Research initiated coverage with a Buy rating and a target price of Rs 550, valuing the company at 6.0x FY28E EV/Ebitda. Emkay described the setup as favourable on industry fundamentals and company-specific cost improvements.

Another coverage note highlighted a medium-term aluminium market that could remain constrained through CY28, with China nearing its capacity cap and Indonesia’s planned expansion facing execution hurdles. That same note pointed to cost reductions through deeper backward integration across bauxite, alumina, coal, and power, improving self-sufficiency and cash flows.

Citi and Kotak Institutional Equities also initiated coverage with Buy ratings, with target prices of Rs 560 (Citi) and Rs 600 (Kotak). Kotak cited a structural deficit in the aluminium market and elevated prices supporting earnings, while also highlighting free cash flow and rapid deleveraging as key pillars. Citi opened a 90-day “positive catalyst watch” on the stock.

How the stock traded: listing pop, subsequent fall, then rebound

The stock’s early trading has been volatile. Vedanta Aluminium Metal made its market debut at Rs 527 on the BSE. On the NSE, it debuted at Rs 522 after the special pre-open session.

In another listing-day reference, the stock is described as listing at Rs 522 on the NSE against a discovered price of Rs 121.03, representing a premium of 331.3%. After the initial enthusiasm, the stock fell sharply, with one report noting it declined around 15% in less than a month to close at Rs 443.80 on Thursday.

After bullish coverage calls, the stock rebounded, rising more than 3.5% to Rs 459.4 on Friday in one update. In another price reference, it rose 1.62% to Rs 459.25 on Thursday following a coverage initiation.

Key numbers at a glance

Broader demerger context and passive flows

Beyond valuation targets, broker commentary also focused on the aluminium unit’s role in Vedanta’s restructuring. One note said market analysts estimated Vedanta Aluminium’s debut in the Rs 398 to Rs 489 range, while Nuvama expected market capitalisation to exceed Rs 1,740 billion.

Index positioning was also highlighted. Nuvama Alternative and Quantitative Research estimated Vedanta Aluminium could enter the Nifty Next 50 with a weight of about 3.4%, potentially triggering passive inflows of around Rs 13.0 billion.

Credit and profitability metrics have also been part of the discussion. ICRA expects OPBDITA per tonne to exceed USD 1,250 per tonne in FY2027, with total debt to OPBDITA below 1.5x and interest coverage around 7.0x.

Market impact: what the numbers imply for investors

The common thread across the Buy initiations is that brokers see scope for a rerating if earnings growth and deleveraging play out as projected. Nuvama’s FY28 view ties together three measurable drivers in its note: EBITDA at Rs 419 billion, net debt declining to Rs 34 billion, and net debt-to-EBITDA at 0.1x.

At the same time, the notes also list clear risks. Emkay and other coverage cited weak aluminium prices, higher energy costs, project delays, and regulatory changes as key downside factors. Those risks directly affect either the price assumption or the cost curve assumptions embedded in FY28 forecasts.

Analysis: why the cluster of initiations matters

A newly demerged and newly listed company often faces a “price discovery” period where liquidity, index inclusion, and first-cycle earnings expectations all compete to set a valuation anchor. In VAML’s case, the targets ranging from Rs 540 to Rs 600 show a relatively narrow band of optimism, but the stock’s move from the Rs 520-plus listing zone to the mid-Rs 440s also highlights sensitivity to near-term sentiment.

The core analytical debate is not about whether aluminium prices move daily, but whether the combination of structural cost reductions and supportive market conditions through FY28 can sustain the earnings trajectory implied by a 29% EBITDA CAGR forecast. The leverage glide path described by Nuvama is also central, because debt reduction changes risk perception and can influence valuation multiples.

Conclusion

Brokerages including Nuvama, Motilal Oswal, Emkay, Citi, and Kotak have opened coverage on Vedanta Aluminium Metal with Buy ratings and targets between Rs 540 and Rs 600, anchored around FY28 earnings and deleveraging expectations. Near-term trading has been volatile since listing, but upcoming quarters will be watched for evidence of the cost and volume improvements described in initiation notes, along with the pace of net debt reduction.